Tim Hortons pulls plug on ice cream sales at Canadian stores in move to simplify menu

TORONTO • Tim Hortons Inc.’s dream of pairing coffee with ice cream has melted away in Canada, with the company deciding to pull Cold Stone Creamery from its outlets in this country.

Here’s what Tim Hortons is taking off the menu

Tim Hortons Inc. is doing away with a number of less popular sellers on its menu in order to make room for more new and limited-time items.The doughnut and coffee retailer says, however, that it will continue to offer the items until supply is depleted.
Among the 24 items being deleted for the menu:

Mixed Berry Smoothie

Blueberry Danish

Chocolate Danish

Double Berry Muffin

Walnut Crunch doughnut

Timbit Dutchie

Gingerbread Man Cookies

Source: Canadian Press

The Timbit purveyor said Thursday it spent $19-million in the fourth quarter to excise the ice cream brand from this market and is now aiming to help the business simplify its menu and focus on its most popular food items.

The ending of the five-year ice cream partnership in Canada came as Tim Hortons, which has made a series of moves to make its restaurants more productive and competitive over the past year with its core coffee business under threat, missed analyst profit estimates in the period ended Dec. 29, recording 69¢ a share in net income, or $100.6-million, up from 65¢, ($100.3-million). Analysts were expecting average earnings of 77¢ per share.

The company, which sells seven out of 10 cups of take-out coffee in Canada but has seen McDonald’s Restaurants of Canada sip away at its share, has been trying to speed up service for time-pressed customers both inside and outside of its outlets, upgrading drive-thru outlets and introducing digital menu boards and beverage-only lines to survive the “new era” of slower growth and stiffer competition.

“While [Cold Stone] is an excellent brand and a very high-quality product offering, we have determined that the fit was not ideal with our strategy of price, value and speed in the Canadian restaurants,” chief executive Marc Caira told a conference call with analysts.

Performance at the 150 Tim Hortons locations co-branded with Cold Stone in Canada “has been below our expectations,” he said.

Related

Tim Hortons also closed an unspecified number of weak U.S. restaurants in the quarter and cut 24 underperforming food items from its menu. The U.S. closures resulted in a $6.6-million charge in the quarter.

“In this new era, you need to make tough choices,” Mr. Caira said, adding the company will elaborate on further initiatives when it unveils its new five-year strategic plan for investors next week.

For its part, Cold Stone’s owners — the Canadian entrepreneurs who founded the Yogen Fruz chain, who bought a controlling stake in Cold Stone’s parent company Kahala Corp. last summer — plan to open 150 stand-alone franchised Cold Stone Creamery stores of their own in malls, strip centres and kiosks throughout the country over the next four years, and begin selling Cold Stone ice cream and frozen cakes in grocery stores.

Michael Serruya, chief executive of Kahala, said some Canadian Tim Horton franchise owners “have chosen to remain exclusively with Cold Stone Creamery brand” and will be part of its new expansion plan, but did not say how many.

“There is a tremendous opportunity to develop Cold Stone Creamery into a significant player within the Canadian ice cream market,” Mr. Serruya said in an email.

Cold Stone Creamery and Tim Hortons remain business partners in the United States.

At Tim Hortons, operating income fell 1.8% to $147.8-million after removing the Cold Stone Creamery outlets in Canada and U.S. restaurant closure costs. Revenue rose 11% to $898.5-million and same-store sales were up 1.6% in Canada and 3.1% in the U.S.

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